Judo Bank’s Q3 results show solid lending expansion, stable credit quality amid economic uncertainty, and reaffirmed FY26 guidance with a healthy capital buffer.
- Q3 lending growth driven by high originations and lower attrition
- Net interest margin rises to ~3.15%, aligning with 2H26 guidance
- Credit quality stable despite increased provisioning for sensitive sectors
- CET1 ratio steady at 12.6%, supporting capital self-sufficiency
- FY26 guidance reaffirmed with strong lending and profitability targets
Lending Franchise Accelerates with Lower Attrition
Judo Bank (ASX:JDO) delivered a robust third quarter, with gross loans and advances (GLA) growth fuelled by strong new originations and a notable decline in attrition to an annualised 15%. This improvement was largely due to fewer external refinances and discretionary paydowns, underpinning the bank’s SME-focused lending momentum. The lending margin held firm at a blended 4.2%, reflecting a stable mix of new and existing loans. The bank’s approved pipeline stood at $2.2 billion with an average margin of 4.3%, signalling sustained demand ahead.
This lending surge builds on the momentum seen earlier in the year, where Judo’s loan book expanded to $13.8 billion by March 2026, as detailed in the bank’s recent quarterly update solid Q3 lending growth. The combination of high originations and improved retention suggests Judo’s strategy to deepen regional and agribusiness penetration is gaining traction.
Deposit Franchise Strengthens with New Savings Products
On the funding front, Judo’s deposit franchise continued to evolve with the launch of the Direct Online Savings Account (DOSA) in February 2026, complementing the Intermediated Savings Account introduced in October 2025. At-call savings balances have now surpassed $1.1 billion, reflecting growing customer adoption of flexible savings options.
The blended deposit cost improved to 74 basis points in Q3, benefiting from the flow-through of lower-cost term deposits originated earlier in the year. However, new term deposit margins tightened to 64 basis points amid swap rate fluctuations and the bank’s greater pricing flexibility afforded by new savings products. Judo expects these margins to normalise to a long-run range of 80 to 90 basis points by the end of FY26, consistent with interest rate outlooks.
These funding dynamics contributed to a net interest margin (NIM) of approximately 3.15% in Q3, up from 3.03% in the first half of the year, aligning with the bank’s guidance for the second half of FY26. This margin expansion underscores Judo’s ability to manage funding costs effectively while supporting lending growth.
Credit Quality Holds Firm Despite Economic Headwinds
Judo maintained stable asset quality through March 2026, with 90+ days past due and impaired assets steady at 2.65%. In response to ongoing geopolitical uncertainty and market volatility, the bank undertook a comprehensive customer-by-customer portfolio review. The vast majority of borrowers remain in sound financial health with no observable risk deterioration.
Nevertheless, Judo prudently increased its expected credit loss (ECL) provisioning, adding an economic overlay focused on sectors vulnerable to fuel price shocks and broader economic pressures, including agriculture, construction, retail trade, manufacturing, and transport. The collective provision ratio rose modestly to 94 basis points of GLA, up 5 basis points from December 2025, reflecting this cautious stance. Consequently, the FY26 cost of risk guidance was adjusted to a range of 70 to 75 basis points of average GLA.
This measured approach to risk management complements the bank’s strong capital position, with the Common Equity Tier 1 (CET1) ratio holding steady at 12.6%. Organic profit generation fully offset capital absorbed by lending growth in Q3, supporting Judo’s path toward capital self-sufficiency. The bank also retains additional capital levers, such as term securitisation, to bolster its CET1 outlook if needed.
FY26 Guidance Reaffirmed Amid Operating Leverage
Judo reaffirmed its FY26 guidance, projecting GLA between $14.4 billion and $14.7 billion, with net interest margin expected at the upper end of 3.00% to 3.10%. The cost-to-income ratio is anticipated to improve below 50% in the second half, demonstrating operating leverage as investments in productivity and product enhancements take effect.
The bank forecasts a profit before tax (PBT) at the lower end of $180 million to $190 million, with return on equity (ROE) targeted in the low to mid-teens. This outlook incorporates the increased economic overlay on provisioning and upfront costs on new lending. Judo’s confidence in its growth trajectory and capital strength is evident, providing a foundation for continued expansion in the SME lending space.
These reaffirmed targets align closely with the bank’s prior updates earlier this year, which highlighted a 26% half-on-half profit increase and a stable CET1 ratio of 12.6% profit growth with $13.4bn lending milestone. The consistency in guidance amid a challenging economic environment will be closely watched by investors as the bank navigates the remainder of FY26.
Bottom Line?
Judo’s steady credit quality and capital resilience underpin its confident FY26 growth and profitability targets despite economic uncertainties.
Questions in the middle?
- How will evolving interest rate conditions impact Judo’s deposit margins and overall funding costs?
- What is the potential effect of increased provisioning on Judo’s future profitability beyond FY26?
- Can Judo sustain its lending growth momentum while maintaining disciplined credit risk management?